New report shows more private homes won’t end Quebec’s housing crisis — it could make it worse

The Montreal skyline as seen from Mount Royal Friday, November 10, 2017 in Montreal. (Ryan Remiorz/The Canadian Press)

A new report from the Institut de recherche et d’informations socioéconomiques (IRIS) shows that building more homes won’t necessarily end Quebec’s housing crisis.

The research shows that building through the private sector could have an adverse effect and make housing more expensive.

Developers and elected officials have stated that the crisis is primarily the result of insufficient supply, and that with massive housing construction, prices will decline through a filtering process and vacancy chain.

The Canada Mortgage and Housing Corporation has also said 3.5 million new units will need to be built by 2030 – 620,000 in Quebec – to restore affordability in the housing sector.

However, Yaya Baumann and Hélène Bélanger, who co-authored the IRIS report, say the real scope of a housing policy based on filtering is uncertain, and it does not address the needs of lower-income households.

“The housing crisis that has been affecting Quebec since at least the early 2000s shows no signs of slowing down. It is manifested in particular by unprecedented rent increases, worsening health and safety issues, a surge in evictions, rising homelessness, and a shortage — not of housing per se ... — but of housing that meets the needs of low- and moderate-income households,” the researchers wrote.

They say the solution is to build the type of housing that is most needed: social housing.

However, they claim all three levels of government in Canada aren’t keen on doing so.

Other non-profit housing models the researchers recommend include cooperative housing.

“By targeting almost exclusively wealthy households, a housing policy based on the principle of filtering cannot, in the short term, meet the needs of households that are more vulnerable to the vagaries of the private housing market,” the researchers say.

“We need to build build build, but we need to build differently,” Bélanger told CTV News.

‘Trickle down’ effect

The researchers explain that the theory of housing filtering was developed during the 1950s and 1960s, based on the observation that newly built housing tends to decline in quality and value over time, making it more accessible to households with lower incomes than those who previously occupied it.

“This ‘natural’ process, which is fundamentally ‘uncontrollable’ and ultimately results in inadequate or unsanitary housing, cannot be forced to adequately meet the needs of low- or modest-income households,” according to the researchers.

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They say the filtering model resembles trickle-down economics, which has been shown to be ineffective and increases inequality.

The researchers note that the model is limited and simplified, often overlooking potential gentrification, which can put pressure on housing units that were once affordable.

Two studies out of the United States and Denmark have shown that chains of vacancy generated by the construction of housing for wealthy households rarely reach low- or moderate-income households.

In Canada, studies have shown that the filtering model has reversed since the 1980s, as many homes have gained value over time, especially in city centres.

Other obstacles

The filtering model assumes that households are constantly seeking a better home and will move as their families grow and age.

But, in Quebec, there are fewer families in favour of more people living alone.

The researchers say this raises questions about what homes become vacant and their ability to meet the needs of low- and moderate-income households buying their first home, especially if they have a larger family.

The researchers also noted that buyers who never rented and those owning multiple properties are major obstacles to home ownership, in addition to vacancy chains.

They noted that one-fifth of Canadian first-time home buyers never rented, rather living with family before purchasing their house, meaning they are not vacating an apartment when moving.

Although data is limited in Quebec, in Ontario and British Columbia, approximately 15 per cent of individual homeowners were considered multiple homeowners in 2022.

These homeowners owned 31 per cent and 29 per cent of the housing stock in their provinces.

The report notes that renters are also struggling with low vacancy rates and skyrocketing rents.

Data published by the CMHC in December supports the researchers’ conclusions for renters: even though Montreal’s vacancy rate went up for the first time in years, so did rent.

The immigration factor

The report also raises questions about the notion that the population has been growing faster than housing units.

Between 2001 and 2021, there were 16,000 more new housing units than new households in Montreal.

The number goes up to 17,000 in Quebec City.

“However, politicians, fueled by popular discontent over the challenges posed by the housing market, have demanded that Ottawa radically lower its permanent immigration targets, wrongly attributing responsibility (in whole or in large part) for the housing crisis to immigration,” the report notes.

Over the last two years, Quebec has built a record number of new housing units, according to the CMHC, but their prices remain high.

“The apparent renewed political interest in the principle of filtering ... does not stem from the crisis of availability and affordability of housing for low- and moderate-income households in the private rental market, but rather from the tightening of the property market for owner-occupiers, both in terms of new construction and the resale market, leading to rising prices,” the report says.